Federal Jury Acquits McDougal On One Charge and Is Split on 2

By NEIL A. LEWIS

Published: April 13, 1999

LITTLE ROCK, Ark., April 12—
A Federal jury today acquitted Susan H. McDougal of obstructing justice when she refused to testify before a grand jury about the Arkansas financial dealings of President Clinton and his wife, Hillary Rodham Clinton. But the jury, in its third day of deliberations, deadlocked on two counts of criminal contempt, and the judge, George Howard Jr., declared a mistrial on those charges.

Although the trial had a mixed result, it amounted to a setback for Kenneth W. Starr, the independent counsel for Whitewater matters, who Ms. McDougal contended was out to get the President. Mr. Starr brought the criminal case after she had served 18 months in jail for civil contempt for resolutely refusing to cooperate with his investigators and not answering questions put to her on two occasions by a grand jury.

Prosecutors did not immediately say whether they would seek to retry her on the two contempt counts, although Mark Barrett, the principal trial prosecutor, said, ''That's definitely an option.''

Ms. McDougal exulted when the verdict was read and told reporters later that she was especially elated because the trial had given her an opportunity ''to tell the world what kind of man Ken Starr is.''

In a statement, Mr. Starr said his office was ''obviously taking this very seriously.'' Mr. Barrett, who said he had consulted with Mr. Starr about a retrial, said the prosecutors would speak to jurors and that would weigh heavily in the decision.

Two jurors interviewed after the trial said the vote had been 7 to 5 in favor of acquittal on the two contempt counts before the jury told the judge that it was deadlocked.

Mark Geragos, Ms. McDougal's lawyer, said the trial result ''put a stake through the heart of Ken Starr.''

Ms. McDougal's case is almost certainly the end of the Arkansas phase of the Whitewater investigation, which began with a local real estate venture involving the Clintons and spread to a range of other issues, including the President's affair with Monica S. Lewinsky, which led to a months-long impeachment battle.

Like several of the cases brought by the independent counsel, the trial of Ms. McDougal was less about any wrongdoing uncovered in the investigations than about a lack of cooperation with the investigators.

Ms. McDougal declared that she would not cooperate with any grand jury associated with Mr. Starr because she did not trust him, and that assertion apparently played a significant role in her acquittal on the obstruction charge. Of the three counts she faced, that was the only charge in which Judge Howard instructed the jurors that they could consider her state of mind.

''Everybody in America knows that Ms. McDougal did not answer those questions before the grand jury,'' Michael Nance, a juror and Little Rock truck driver, told reporters after the trial. ''The issue was the state of her mind.''

Ms. McDougal testified at the trial that she believed that Mr. Starr and his associates had been bent on getting her to lie to damage Mr. Clinton's chances for re-election in 1996. She said that her former husband, James B. McDougal, who was then negotiating with prosecutors, had told her she could escape prosecution if she concocted a story that she had had a sexual affair with Mr. Clinton. Prosecutors vigorously denied this, contending it demonstrated her flair for dramatic fantasies.

The McDougals had been partners with the Clintons in the failed Whitewater land development, and both McDougals were convicted of fraud in May 1996 in connection with an illegally obtained $300,000 loan, about $50,000 of which wound up paying for Whitewater expenses, according to prosecutors. Mr. Clinton testified he knew nothing of the loan. Ms. McDougal had declined to answer questions from the grand jury about Mr. Clinton's knowledge of the loan, but at her trial she said she knew of no wrongdoing by either Clinton.

The prosecutors, Mr. Barrett and Julie Myers, sought to present a straightforward version of the case against Ms. McDougal, arguing that she had been given immunity from prosecution and was ordered by a Federal judge to answer the grand jury's questions.

But Mr. Geragos, her lawyer, mounted a vigorous attack on Mr. Starr and his prosecutorial tactics. Over strong objections from prosecutors, Judge Howard allowed Mr. Geragos to call as witnesses several figures who complained about how they had been treated by Mr. Starr and his prosecutors. One of those who testified, Julie Hiatt Steele, is being prosecuted in Virginia for offering conflicting versions of what she had been told by a friend, Kathleen E. Willey, who claims that Mr. Clinton made unwanted advances toward her in the White House.

Mr. Starr, according to lawyers familiar with the case, is investigating whether there were efforts to intimidate Ms. Willey and influence her testimony. Ms. Steele, who once confirmed aspects of Ms. Willey's account but now disavows it and swears that her former friend asked her to lie, has become a subject of that investigation.

But the jury was split on whether Mr. Starr and his prosecutors had been excessive or too zealous.

''The Office of the Independent Counsel was not on trial here,'' said Mr. Nance, who wanted to acquit Ms. McDougal. His views were shared by the jury foreman, Donald R. Thomas. Mr. Thomas, a factory supervisor from Conway, told reporters that he did not believe the prosecution's tactics were an issue.

But another juror, Charles Adams, a retired worker from Little Rock, said in an interview that some of his fellow jurors ''just hated the independent counsel.'' Mr. Adams, who thought Ms. McDougal guilty on the two contempt counts, said that at times it appeared Mr. Starr was on trial and that some jurors ''were just not going to give any ammunition to them to help get the President.''

Mr. Nance, who almost caused a mistrial on Friday when he took an unauthorized law book into the jury room, said the deliberations were often angry. When the judge questioned jurors in open court today, 9 of the 12 said they did not believe further deliberations would produce a verdict on the remaining counts.

Democrats on the House Judiciary Committee said today that they were considering asking Ms. McDougal to testify about the independent counsel law, which is soon to expire.

Although Mr. Barrett, the prosecutor, left open the possibility of a retrial, there are some factors that make it unlikely. The Starr investigation is winding up and many of the lawyers are leaving. In addition to Ms. Steele, the only person scheduled to go on trial is Webster L. Hubbell, a former Associate Attorney General and longtime Arkansas friend of the Clintons whom Mr. Starr has indicted three times.

Mr. Hubbell, who served 17 months in prison for bilking former law partners in Little Rock, now faces separate trials in Washington on tax and fraud charges. Prosecutors say that he accepted thousands of dollars in bogus consulting fees from Clinton political supporters that were meant to buy his silence and on which he paid no taxes. And they contend he concealed the role he and Hillary Clinton played in one of the complicated land deals in Arkansas.

Ms. McDougal, who seemed to enjoy the trial even though she faced a possible sentence of 27 months on each charge, had a coterie of family and friends present in the last five weeks and became a bit of a celebrity as she walked around Little Rock, receiving good wishes, even from strangers who came up to her and almost always said they were tired of Mr. Starr's investigation.

Photo: After being acquitted of obstructing justice, Susan H. McDougal left the Federal courthouse in Little Rock, Ark., with her lawyers, Mark Geragos, left, and Pat Harris. The judge declared a mistrial on separate charges. (Reuters)(pg. A21) Chart: ''CHRONOLOGY: Susan McDougal'' MAY 28, 1996 -- Convicted in Arkansas in a case brought by the independent counsel Kenneth W. Starr. The conviction involved four felony counts of conspiracy and mail fraud stemming from charges that in 1986 she fraudulently obtained a loan of $300,000 that was used to pay expenses in the Whitewater land development deal. AUG. 20 -- Sentenced to two years in prison. SEPT. 4 -- Refuses to testify before the Whitewater grand jury about Bill and Hillary Clinton, her former business partners in Whitewater. SEPT. 9 -- Ordered to jail by Judge Susan Webber Wright of Federal District Court in Little Rock, Ark. OCT. 9 -- Contempt of court ruling is upheld. MARCH 9, 1998 -- After completing 18 months in a series of jails for civil contempt, remains in a Federal jail and begins serving a two-year sentence in the Whitewater case. MAY 4 -- Indicted on two counts of criminal contempt and one count of obstruction for refusing to answer questions of the grand jury on Sept. 4, 1996, and April 23, 1998. JUNE 25 -- Released from prison after a Federal judge grants her time served on her two-year Whitewater sentence because of health problems. NOV. 23 -- Acquitted of embezzlement charges in a California case accusing her of stealing $50,000. MARCH 8, 1999 -- Trial on criminal contempt charges and obstruction of justice charges. APRIL 12 -- Acquitted of obstruction of justice by a jury that deadlocked on two counts of criminal contempt. Prosecutors say retrial on those counts is an option. (pg. A21)